Can I sell my parents house to pay for care in 2024?

As care costs continue to rise, families across England and Wales are increasingly facing difficult decisions about how to finance the care of their ageing parents.

With care home fees averaging between £700 and £1,500 per week – and potentially much higher for specialised or luxury care – selling a house is often considered a practical solution to cover these substantial expenses.

However, this process raises many questions, particularly regarding the legalities and implications of such a sale. In this article we will cover if you can legally sell your parents’ home to pay for care home fees, what the potential downsides are and how you can ensure that the sale is ethical and legal.

Can you sell your parents home to pay for care home fees?

Yes, you can sell your parents’ house, but it depends on various legal factors. The most important aspect is whether you have the legal authority to execute such a significant transaction. Inheriting a property in the future doesn’t grant you the right to sell it now.

If your parents are alive but unable to make decisions, you may need to obtain power of attorney to manage their affairs, including selling their home. If your parents have passed away, you’ll need to be the executor of their estate or obtain probate to proceed with the sale.

It’s essential to have your parents’ consent to sell the property if they are alive. If they cannot provide consent due to mental incapacity, legal steps must be taken to ensure the sale is conducted ethically and legally.

Before selling, verify that your parents have full ownership of the property. If there are multiple owners, all parties must agree to the sale. Disputes over ownership rights must be resolved before proceeding. 

How do I sell my parents house?

You are going to need to start by getting the property professionally valued to determine its market worth. You can hire a chartered surveyor or speak to an estate agent about getting the property is valued accurately.

Consider factors such as the property's condition, location, size, and local market trends in the valuation.

Be sure to research and choose a reputable estate agent to help you sell the property. Look for agents with experience selling similar properties in your area and obtaining great results.

It is best to obtain multiple valuations and compare agents' fees and services before making a decision on who to work with. If the property is reasonably old and dated, make necessary repairs and improvements to enhance the property's appeal and value to a contemporary market.

Declutter and depersonalise the space to make it more attractive to potential buyers, even if it feels difficult emotionally to do so. Show the potential of the property rather than its history.

Work with your estate agent to create a marketing strategy that targets potential buyers effectively. Use online listings, social media, and traditional property advertising methods to reach a broad audience to sell the house.

Be patient with yourself and this process, it isn’t easy.

Selling a family home entails more than just dealing with paperwork and property transactions; it's a profoundly personal and emotional journey. The home where you've grown up, brimming with memories and affection, becomes a tangible representation of your parents' legacy. 

Manoeuvring through this emotional landscape can be among the most demanding aspects of the sale, yet it's essential for fostering new opportunities and embracing new chapters of growth.

Do I have to sell my mum’s house to pay for a care home?

In England and Wales, whether you need to sell your mum’s house to pay for her care home fees depends on her financial situation and the total value of her assets. The local authority will carry out a financial assessment, known as a means test, to determine how much your mum can afford to contribute to her care costs. 

This assessment takes into account all her assets, including savings, income and the value of her home. 

Understanding the means test thresholds

If your mum’s assets, including the value of her home, exceed £23,250, she will generally be required to pay the full cost of her care. This means she may need to use her savings, income and potentially the value of her home to cover these costs. 

In many cases, this could lead to the sale of the house if other funds are insufficient to cover the care fees.

If her assets fall between £14,250 and £23,250, the local authority will expect her to contribute to the cost of her care, but they will also provide some financial support. 

The amount she is required to contribute will be determined by a sliding scale, where she may have to use her assets and income to pay a portion of the fees, with the local authority covering the rest.

If her total assets are below £14,250, she will not be required to use these assets to pay for her care. However, she may still be expected to contribute from her income, such as pensions or benefits, to help cover the costs of care. The local authority would usually cover the remaining care home fees.

In what circumstances does the property get disregarded?

In certain circumstances, the value of the home may be disregarded during the means test. This can occur if specific conditions are met, such as:

What is a Deferred Payment Agreement?

If selling the house is not desirable or possible immediately, your mum might be eligible for a Deferred Payment Agreement (DPA) with the local authority. 

Under a DPA, the local authority pays the care home fees on your mums behalf, and the costs are secured against her property. The debt is repaid when the property is eventually sold, either after your mum’s death or if the house is sold while she is still alive.

A DPA can be an option to prevent the immediate sale of the home, giving more time to consider long-term financial arrangements. However, interest may be charged on the amount owed, and there may be administrative costs associated with setting up the agreement.

How can my parents prevent their house from being sold to pay for care home fees?

When it comes to protecting the family home from being sold to cover care home fees, there are a few strategies that your parents could consider. However, each option has its own set of risks, complexities and legal implications. 

It’s important to approach these decisions carefully and, ideally, with the help of professional legal advisors. Here are some key methods your parents might consider:

Option 1: Deferred Payment Agreements

The Deferred Payment Agreement, offered by local authorities in England and Wales allows individuals to defer the sale of your home to pay for care home fees. 

To qualify for a DPA, your parents must meet certain criteria set by the local authority. Generally, the person must have less than £23,250 in other assets (excluding the value of their home) and must be a homeowner.

Under a DPA, the local authority agrees to cover the cost of your parent’s care home fees, with the agreement that the amount will be repaid when the property is eventually sold. This could be after your parent’s death or if the house is sold while they are still alive.

The local authority usually charges interest on the amount deferred, and there may also be administrative fees for setting up the agreement. It’s important to be aware of these costs, as they will add to the total amount that needs to be repaid.

A DPA can be an attractive option if your parents wish to avoid selling the house immediately, allowing more time to consider their options or for the family to arrange alternative financial support.

While a DPA can prevent the immediate sale of the home, it does not eliminate the eventual need to repay the debt. The accumulated fees, interest and other costs will need to be paid back when the house is sold. This is something to plan for, as it will reduce the value of the estate passed on to heirs. 

Option 2: Gifting the property

Your parents must consider gifting their property to you or another family member to remove it from their estate, thereby potentially avoiding the need to sell it to pay for care home fees. However, this option comes with significant risks and legal considerations.

If your parents transfer ownership of their home to someone else, the local authority may view this as “deliberate deprivation of assets.” This means they believe the gift was made specifically to avoid paying for care. If the local authority determines this to be the case, they can still treat the house as if it belongs to your parents when conducting the means test.

The timing of the gift and the intention behind it are important. If the transfer occurs shortly before the need for care arises, or if there is clear evidence that the intention was to avoid care fees, the local authority is more likely to challenge the transfer. Even if the gift was made several years prior, the local authority might investigate and determine that it was done to avoid future care costs.

Gifting the property can also have tax implications. For instance, if your parents gift the house but continue to live in it without paying rent at the market rate, it could be considered part of their estate for Inheritance Tax purposes. Additionally, there could be Capital Gains Tax implications for the recipient of the gift if the property is later sold.

Once the property is gifted, your parents would no longer have legal control or ownership of the house, which could lead to complications if their circumstances change. For example, if relationships deteriorate or if the new owner faces financial difficulties, this could impact your parents’ living situation. 

Option 3: Setting up a trust

Another option your parents might consider is placing their property into a trust. A trust is a legal arrangement where the property is managed by trustees for the benefit of named beneficiaries. This can be a more complex method of protecting assets, and it’s essential to get proper legal advice before proceeding. 

There are various types of trusts, such as life interest trusts or discretionary trusts, that can be used to protect the family home. In a life interest trust, for example, your parents might retain the right to live in the home for the rest of their lives, while the property itself is owned by the trust.

Setting up a trust should be part of long-term estate planning, and it needs to be done well in advance of any potential need for care. If the trust is set up close to the time when care is needed, the local authority may still challenge it as a deliberate attempt to avoid care costs.

Even if a trust is established, the local authority might scrutinise it to ensure it was not set up to avoid care fees. Trusts are complex and can attract attention, so it’s important that they are established for valid legal reasons beyond just protecting the property from care costs.

Setting up and managing a trust can be expensive and time-consuming. There are legal fees involved in creating the trust, and ongoing management fees may also apply. Additionally, trustees will have responsibilities to manage the property according to the terms of the trust, which could add complexity.

Placing a property into a trust can also have implications for your parent’s eligibility for certain means-tested benefits, as the trust could still be counted as an asset in certain circumstances.

Which is the best option?

Each of these options – Deferred Payment Agreements, gifting the property, and setting up a trust – offers different ways to potentially protect your parents’ home from being sold to pay for care home fees. However they all come with significant risks and legal complexities. 

The local authority has the power to investigate any actions that could be seen as attempts to avoid paying for care, and they may still include the value of the house in their calculations if they believe it was transferred or placed into a trust to circumvent care costs.

Because of the complexity and the potential for significant financial implications, it’s strongly recommended that your parents seek professional legal advice before making any decisions.

What is the 7 year rule for care home fees?

The “7 year rule” is a concept that often causes confusion when discussing probate, as it is both used in the context of Inheritance Tax and care home fees. While this rule is well-known in relation to Inheritance Tax, it does not offer the same protections when it comes to paying for care home fees. 

The 7-year rule originates from UK tax law and applies to Inheritance Tax. It essentially states that if your parents give away their property or other significant assets and survive for at least seven years after making the gift, these assets will generally be excluded from the estate for Inheritance Tax purposes. This can potentially reduce the amount of IHT that needs to be paid upon their death.

If your parents pass away within seven years of making the gift, taper relief may apply, which can reduce the amount of Inheritance Tax due depending on how many years have passed since the gift was made. The closer to seven years they survive, the less IHT may be due on the gifted assets.  

When it comes to care home fees, many people mistakenly believe that the 7 year rule also applies – thinking that if they give away assets at least seven years before needing care, those assets won’t be considered in a means test. Unfortunately, this is not the case:

What’s the best way to pay for your parents’ care home fees?

Selling your parents; house for cash might seem like a straightforward way to manage their finances and potentially avoid complications related to care home fees, but it comes with significant considerations and potential benefits. 

Selling the house converts an illiquid asset into cash, which can be used immediately. This can be useful for covering home fees or other expenses without needing to borrow against the property or enter into complicated financial arrangements like a Deferred Payment Agreement.

Having cash instead of the property simplifies the financial situation, making it easier to manage and allocate funds for care, especially if your house requires ongoing, long-term care.

And finally, by selling the property and paying for care directly, your parents might still retain some of their estate (depending on the sale proceeds and care costs). This can sometimes preserve a portion of the inheritance for the family compared to entering into a DPA or seeing the property value diminished by long-term care costs. 

At The Property Buying Company, we understand the urgency and stress that can accompany selling a property. As cash buyers, we may not offer 100% market value for your home, but we prioritise providing a swift, free, and secure service. We aim to simplify the process, alleviating the burdens typically associated with selling a property, allowing you to relax while we handle the tricky stuff.

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For a hassle-free experience, free from chains and fees, look no further. Whether you're seeking a quick sale or simply want to offload a property swiftly, we're here to assist.

If you're ready to sell your home promptly and bypass the hassles of the open market, don't hesitate to reach out. Fill out one of our free, no-obligation forms today to receive your cash offer; we can deposit funds into your bank account in as little as 7 days.